What is the AAR for this problem?

CFA Level I
#1

could you show the process of your calculation? Thanks. ---------------------------- || year1------- || year2------ || year3------- || year4 Sales-------------------- || $480,000 || $520,000 || $640,000 || $420,000 cash expenses------ || $220,000 || $180,000 || $360,000 || $140,000 Depreciation---------- || $200,000 || $200,000 || $200,000 || $200,000 Earnings before tax || $60,000 || $140,000 || $80,000 || $80,000 Taxes (30%)---------- || $18,000 || $42,000 || $24,000 || $24,000 Net Income------------ || $42,000 || $98,000 || $56,000 || $56,000

#2

I assum they are us SL for depreciation and a zer salvage value. so the asset is 800,000-0/2= 400,000 avg NI= 42000+98000+56000+56000/4= 63000 63000/400000= 15.75%

#3

correct. I didn’t realize that the only asset is the the depreciable asset. So I was looking for book value but couldn’t find it. Thanks again.

#4

no problem portfolio

#5

What is AAR? from what you’ve done, it seems average NI / Average Assets. Why do you call it AAR? I think it is ROA.

#6

I forget its either average accounting return or accounting average return

#7

Average accounting return = average project earnings after taxes and depreciation/average cost of the investment

#8

map1 Wrote: ------------------------------------------------------- > Average accounting return = average project > earnings after taxes and depreciation/average cost > of the investment what chapter is this term in?

#9

corp finance i believe